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An Alternative To Money Market Funds

November 2017

October is behind us and the amazing stock market rally has continued into early November. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all reached record highs in October. Technology stocks have been the leading sector by far in 2017.

The extraordinary rally has continued even though not a single item of the Trump legislative agenda been passed by Congress. However, The GOP controlled House of Representatives did release their tax cut proposal in early November. Thus, there is growing optimism tax reform will pass by the end of this year or early next year.

The Federal Reserve chose to stand pat at the October 31 - November 1 meeting. The Fed is expected to raise rates 25 basis points at the December meeting. On November 2, President Trump nominated current Fed Governor Jerome Powell to become the next Chairman of the Federal Reserve. Upon Senate confirmation, Mr. Powell will succeed Janet Yellen, whose term expires in early February. It is expected that Mr. Powell will continue to pursue a low interest rate policy upon becoming Fed Chairman.

Both Brent Crude Oil and West Texas Intermediate (WTI) Crude Oil continued their move higher into early November. As of November 3, Brent Crude ended trading @ $62.13/barrel while WTI ended trading @ $55.69 per barrel. Back in June, some analysts predicted Brent and WTI crude oil would soon trade down to a range of $30 to $35 per barrel. 

One of the reasons cited for the strong rally in crude oil has been the rising economic problems in Venezuela. Venezuela now seeks to restructure its mountain of debt, over $140 billion. It has been having difficulty paying its workers at the state run oil company PDVSA. It has also fallen behind on its shipments of crude oil to two of its largest creditors who have prepaid for deliveries, Russia and China. There have been reports that the quality of its crude oil being shipped has deteriorated to the point that orders are being canceled or heavily discounted.

In Merger & Acquisition news, Sprint and T-Mobile are reportedly having difficulty reaching an agreement on terms of a merger. The deal is expected to be an all stock transaction, if agreed upon. AT&T and Time Warner are seeking to reach an agreement with the Justice Department to avoid seeing their deal be challenged in court. Meanwhile, CVS is reportedly seeking to acquire Aetna in a cash and stock deal valuing Aetna at over $66 billion or $200 per share.

My weekly radio show on WWPR 1490 AM airs at 12.30pm each Friday. My prior radio shows and newspaper columns are available on our website (www.amescapmgmt.com).

If you are unhappy with the returns now offered by money market funds feel free to contact us.

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